According to the ABA, the House should support Rep. Emmer’s anti-CBDC bill because issuing a CBDC will disrupt the financial clime.
The American Bankers Association (ABA) has asked members of the House of Representatives to vote in favor of a bill that blocks the United States Federal Reserve from issuing a retail Central Bank Digital Currency (CBDC) directly to individuals. The ABA wants the House to vote in support of H.R. 5403, the CBDC Anti-Surveillance State Act, introduced by Congressman Tom Emmer (R-Minn.), which now has 165 cosponsors.
ABA Says CBDC will Threaten the Current Financial System
According to an official ABA letter addressed to Speaker Mike Johnson and Minority Leader Hakeem Jeffries, the association expressed “serious concerns” about the Fed’s proposed issuance of a CBDC. He stated:
“ABA believes strongly that a CBDC, defined as a digital form of central bank money that is widely available to the general public, is unnecessary in the United States and would present unacceptable risks and costs to the financial system. The dollar is already digital today, and it is unclear how issuing a CBDC would improve financial inclusion or achieve other laudable goals.”
The ABA continues that a CBDC should not be supported because it would change the relationship between the Federal Reserve and American citizens. In addition, the association believes that it could worsen economic and liquidity crises, undermine financial intermediation done by banks, and stifle the implementation of monetary policy.
According to the ABA, the risks associated with CBDC issuance are likely to outweigh any potential benefits. The association specifies that a CBDC will compete with retail bank deposits and move money from banks to the Federal Reserve. This could impede the ability of banks to offer loans that help general economic growth.
The ABA wants the House to vote in favor of HR 5403 because:
“It would prohibit the Federal Reserve Banks from issuing a CBDC directly or indirectly to individuals. It would also prohibit the use of a CBDC to implement monetary policy and prohibit the Federal Reserve Board or the Department of Treasury from issuing a CBDC without Congressional approval.”
According to an official announcement, the bill is supposed to go to a vote this week.
CBDC in the US
In March, Fed Chair Jerome Powell said in a Senate hearing that the agency is nowhere near recommending or adopting a CBDC. Powell said it is not something people need to worry about. However, he added that if the Fed decides to build a digital dollar, it would need the banking system to manage people’s accounts. Powell’s point may directly assuage the ABA’s concern that a CBDC will undermine the role of banks and the banking system in general.
In January, financial services giant Morgan Stanley noted that a shift in the global perception and use of digital assets, including CBDCs, could threaten the dollar. According to the company’s Head of Digital Assets, Andrew Peel, CBDCs could help to facilitate cross-border payments. Unfortunately, this will considerably sideline the dollar’s use for this type of transaction.
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